Answer:
She turned around and said, "By the way, Sally, where were you on Halloween, 1998?"
Explanation:
First of all, for any reported speech, the insertion of the comma (,) right after 'said' is a must. Then, we have the commas (,) next to way, Sally, and Halloween. These are correct as they are the prominent points in the whole speech where the emphasis is on. The inclusion of the comma right after Halloween implies that the speaker is asking about a particular Halloween, i.e. 1998. Putting commas before and after Sally laid the emphasis on the addressee- Sally.
So, the first option is the right answer.